Chmn. Powell responded Thurs. to Senate questions about whether the FCC’s recent work on E-rate was politically motivated. “That is ridiculous and unfounded,” Powell told reporters. “I've been here 7 years. This program has been run as effectively and efficiently by us as by anyone else. I don’t think it’s politically motivated to make sure govt. money, $2.25 billion of taxpayers’ money, complies strictly with the govt. accounting and auditing standards.” Powell added he also didn’t view as political a decision to keep the USF contribution rate low in light of funding shortfalls that led to an Aug. 3 suspension of the program. “The Commission worries about all consumers,” he said. “The contribution factor gets paid by somebody, It gets paid by individual bill payers.” Powell said he hopes Congress will look at changing the law if it has concerns about how FCC has handled the program. “If we all care about the program, what we ought to be worried about is how to fix it,” he said. “Let’s talk about legislation that would either exempt or modify the [USF] program so it didn’t have to comply with the Antideficiency Act.” Powell said he was ready to appear before the Senate on the issue if called: “I work for them and I'll participate as they choose.” HB
FCC Chmn. Powell said Wed. the Commission acted properly in ordering the Universal Service Administrative Corp. (USAC) to change how it accounts for money in the federal E-rate program fund, the subject of a Senate Commerce Committee hearing yesterday. The issue has gotten considerable national attention in recent days, including coverage in the N.Y. Times and across the country. But the FCC’s 2 Democrats sharply criticized Powell over the way the Commission handled the issue.
Responding to a WilTel complaint, AT&T told the FCC in a letter Mon. that it isn’t improper for AT&T to exclude universal service contributions from its enhanced prepaid card revenues. WilTel had asked the FCC to deny the Wireline Bureau’s proposed 8.9% universal service fund (USF) contribution factor because it doesn’t include AT&T enhanced prepaid card revenues. The request became moot Sept. 30 because the time period for the FCC to halt it expired, but the FCC in a different proceeding has been considering possible action against AT&T’s handling of its prepaid card revenues. AT&T argued in the letter that USF contributions aren’t required because the card is an information service and “WilTel’s suggestion that AT&T is not living up to its universal service obligations is absurd” because “AT&T is the single largest contributor to the USF.” AT&T criticized WilTel and BellSouth assertions “that AT&T is enjoying an unfair, discriminatory competitive advantage” by not paying universal service contributions. “Other providers are free to qualify their prepaid card services as information services, outside of the duty to contribute to the USF,” AT&T said. If the FCC adopts a numbers-based approach to USF contributions, “the regulatory classification of a service as an ‘information service’ or ’telecommunications service’ will no longer be determinative, because providers of both sets of services will be required to contribute to the USF based on their end-users’ assigned telephone numbers.” The company also noted that the “predominant users” of the enhanced prepaid card are military, low-income, minority, immigrants and retirees who depend on the cost-effective nature of the card. Requiring USF contributions “would shift the USF burden from more affluent consumers to individuals who are least able to afford it.”
The Universal Service Administrative Corp. (USAC), which administers the $2.25 billion federal E-rate program, acknowledged at a Senate Commerce Committee hearing Tues. it had lost $4.6 million as a result of an accounting change requiring the corporation to have cash on hand to meet commitment letters. The change forced USAC to sell off high interest Treasury bills (T-bills) and other assets, paying significant penalties.
Wireless carriers acknowledged Fri. they seem to be making little progress on getting the FCC to change course on upcoming Auction 58, the major PCS auction slated for Jan. Carriers led by CTIA have been pushing the Commission to changes the rules of the auction to eliminate the set-aside for “designated entities” of more than 1/2 the 234 10-MHz licenses up for sale.
The Mo. PSC declined to certify 2 rural incumbent telcos as qualified to continue receiving federal universal service funds. The PUC notified the FCC that it was decertifying Cass County Telephone and New Florence Telephone, both run by an executive that the FBI alleged has ties to organized crime. The PUC said there were unanswered questions about whether the telcos had knowingly overpaid for data services provided by a firm the FBI alleged had Mob connections, thereby misrepresenting their costs of doing business. The FBI in July arrested Kenneth Matzdorff, alleging he was a front man for the Gambino crime family in a fraud scheme that involved deliberate large overpayments for business services from Mob-connected companies. Matzdorff still is CEO of Cass County Telephone but quit New Florence Telephone in Aug. The telcos serve about 8,500 lines total, and last year received about $3.2 million in universal service subsidies. Officials of the telcos denied any improper spending. They said a pending 3rd- party audit will show the subsidy money was spent properly. They said once the audit vindicates them, they will move for reversal of the PUC decision.
Cellular One, a subsidiary of Western Wireless, said Wed. the S.D. PUC had designated it an eligible telecommunications carrier (ETC) in the state, qualifying it for USF support.
The Internet Innovation Alliance (IIA) officially kicked off Mon., as its leaders said “promoting VoIP services” and “educating people” were top goals of the new group. Unlike other VoIP organizations, such as the VON Coalition, the IIA will focus primarily on regulatory and economic rather than social policy VoIP issues, its leaders said.
WilTel petitioned the FCC to reduce or adjust its proposed 8.9% 4th-quarter Universal Service Fund (USF) contribution factor, used by carriers to compute their USF contributions. The factor, routinely set by the Wireline Bureau, will go into effect Sept. 30 unless the Commission steps in. WilTel challenged the “legitimacy” of issuing the factor without doing something to “eliminate discrimination” in the way the contributions are recovered. WilTel took exception to the fact that AT&T hasn’t been making contributions the USF for enhanced prepaid calling cards services while competitors continued to pay. WilTel said it thought the AT&T situation was just part of the problem and “the rest of a large ‘non- contributor iceberg’ lies just below the surface.” The 8.9% factor becomes discriminatory when it’s not being recovered equally from all competitors, the company said.
The Senate Commerce Committee approved legislation Wed. that would reform the “non-rural high cost” portion of the universal service fund, which goes to RBOCs and other large ILECs serving rural areas. The bill, S-1380, which would restructure the formula under which the fund is distributed, passed 13-9. Much of the non-rural fund goes to Miss. and W. Va. but that could change under the restructuring. Bill sponsor Sen. Smith (R-Ore.) said he would try to work with Sen. Lott (R-Miss.) to look for ways to help “specific states like Mississippi.” Lott opposed the bill, saying Miss. would go from receiving $133 million yearly to just $33 million. “It’s particularly punitive to my small rural state,” Lott said. The bill would calculate support based on wire centers, as opposed to calculating a state average, which critics said favored some states and prevented others from receiving any of the $277 million fund. The bill is known by many as the “Qwest bill,” since Qwest would be a major beneficiary of the formula change. Qwest on Wed. said it “applauded” the senators for passing the bill and that it would create investment in rural telecom infrastructure. BellSouth, which receives the funding in Miss., said comprehensive USF reform was needed, not a piecemeal approach. Sen. Dorgan (D-N.D.), an ardent supporter of USF reform, said he would reluctantly vote for the measure but added that comprehensive reform was needed during the next Congress. Rep. Terry (R-Neb.) has similar legislation in the House. “The momentum created by the Senate Commerce Committee will hopefully carry over to the House so we too can see some meaningful movement on this issue. We need to ensure that this money is allocated to the rural areas this fund was designed to help,” Terry said Wed.